I'm not an expert with Karaoke, but here is what the help files say about CDG files with Band in a Box.

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Karaoke MP3/CDG Files. Audio Karaoke files are popular using several formats. The most common is CDG format, which includes the lyrics in graphical format on Audio CD’s. Since the computer user doesn’t typically use audio CD’s, there is now a format that combines MP3 (containing the music) and CDG (the graphical lyrics). Now you can open up MP3/CDG files inside Band-in-a-Box and see the scrolling lyrics from your Karaoke files. Best of all, you can use the Audio Chord Wizard to figure out the chords as well, making Band-in-a-Box a great choice to play your Karaoke files!